Saturday, 09/08/2008 08:44

Capital in surplus, banks tighten loans

Many banks have abundant capital but are still tightening lending to businesses and individuals. Many big banks only lend to familiar clients. Banks are facing two choices: safety or profit.

General Director of East Asia Bank (EAB), Tran Phuong Binh, confirmed that EAB’s top priority is safety, rather than profit.

Other banks, namely Asia Commercial Bank (ACB), Sacombank, Technological and Commercial Bank (Techcombank), and VPBank share the same point of view as EAB.

Le Dac Son, General Director of VPBank, told the press: “At present, we aren’t racing for profit at any cost. Safety is the top priority, so we accept not developing credit.”

Another banker said many commercial banks are restricting loans not because they have reached the threshold of growth of 30%, but because they are worried about bad debts when loans for real estate, consumption and securities mature in the late months of 2008.

ACB General Director Ly Xuan Hai said: “Our debt balance has increased 30% so ACB is limiting lending to new clients to ensure credit growth will be no higher than 30% at the request of the State Bank of Vietnam.”

Some banks are considering whether they should borrow capital at high interest rates in this situation.

The Deputy General Director of a big company said: “Many banks have reduced interest rates but the reduction of 1-2% per year is negligible, and only some subjects benefit from that, while many kinds of costs have increased highly so businesses are not keen on banking capital.”

A banker admitted that many businesses can borrow capital from other sources at lower interest rates while they don’t even meet conditions to borrow money from banks.

Though the economic situation is not favourable, many banks are still opening new branches or launching new services, for instance An Binh Bank, EAB, Eximbank, ACB and Sacombank.

However, the expansion and launch of new services are considered to serve their long-term strategies, rather than to boost credit growth. Some banks have announced they have adjusted their annual profit goals to lower levels.

VNN

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